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Patent Licensing

Over years or even decades, inventors put in a lot of effort on a daily basis to shape their ideas. After that, they start the difficult process of registering a Patent for their innovations. Rewarding the effort is as simple as awarding a Patent for an invention. When the invention is used effectively, the real benefit will be realized. Not every innovator has the resources or connections for marketing their ideas. When an idea gains enormous form and popularity, Patent licensing helps creators realize their dreams.

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A Patent License: What Is It?

An exclusive privilege granted for an innovation is called a Patent. Patents are useful resources. Licenses can be obtained, sold, and purchased. The right to prevent others from making money off of the invention belongs to the Patent holder. Commercial exploitation is the term used to describe the process by which a product is manufactured, used, distributed, imported, or sold for profit by someone other than the Patent holder.

In general, the Patent can be used in any way that the Patent owner permits to anyone to whom they provide a license. The party who bestows the license is known as the "licensee," and the one who receives it is known as the "licensor."

Pros of Patent Licensing

Before choosing whether or not to pursue Patent licensing, it is imperative that you are aware of all the benefits. The principal benefits are as follows:

Reduces risk: You will be responsible for all associated risks if you start a firm to produce, promote, and sell your own innovation. If your invention fails, you will lose a great deal of money. By granting licenses for your idea, you can make money both now and in the future without having to assume the risk of launching a corporation.
Expanding worldwide: A licensee may have access to additional resources that may enable your idea to become a greater success even while you are unable to produce it on a large scale.
Timing restriction: The license gives you a predetermined amount of time to use your intellectual property. In other words, you have the option of renewing the license or not. All rights are returned to you upon the license's expiration.
Steer clear of legal conflict: filing a lawsuit against someone who steals your Patent can cost you a lot of money and effort. You may avoid all the hassles of a court battle by selling your Patent license instead and getting just financial compensation.

The Cons of Patent Licensing

Even while it's simple to become excited about all the advantages listed above, picking the appropriate choice also requires taking the possible drawbacks into account. The following are some potential drawbacks to be aware of:

Find a buyer: You must locate a buyer (or several buyers) in order to profit from your Patent license. Depending on the kind of design or innovation you have Patented, this could be challenging. Selling Patent licenses can be a time-consuming process.
Getting a better deal: A licensee might not concur with your assessment of the value of your Patent license. Therefore, it can be difficult to negotiate a fair price.

Different Kinds of Patent Licences

There are 8 kinds of licenses as follows:

Exclusive license: The Patent is transferred to the licensee, but the original owner of the invention preserves the title.
Non-exclusive license: The license is issued to numerous licensees.
Sublicense: The licensee may grant licenses to different companies so they can produce the goods. The terms of the agreement between the principal licensee and the third party will determine any earnings.
Cross-licensing: To help with production, licenses can be transferred between different creators or organizations. This happens when a product's creation requires the support of another product.
Compulsory license: This type of Patent is typically applied to pharmaceutical inventions and happens when the government permits someone to utilize your idea, even against your will. A monetary payment of some form is made to the Patent holder.
Voluntary license: Another type of licensing, mostly for Patents in the pharmaceutical industry, is voluntary. These are charitable deeds. In this instance, Patent licensing may be exclusive or non-exclusive.
Carrot license: A marketing strategy known as the "carrot" explains to a prospective licensee the advantages of the Patent license and how it will help them.
Stick license: If someone is already utilizing your Patent without authorization, this is another typical tactic. By providing them with a license, you can prevent a legal dispute.

Documents Needed for Patent Licensing

Documents related to Patents
Contract for licensing
Report on an audit of intellectual property
Plan of Business
Nondisclosure agreement
Accounts Payable
Report on the search for Patent infringement and validity
Technical details and drawings.

How to Get a Patent Licensed?

You will usually do the following steps, or processes that are close to these, in order to license a Patent to another company:

Selecting the Patent to license: This could involve searching through the portfolio of Patents held by your business to locate a technology or product that meets your needs.
Identify potential licensees: Finding possible licensees that are interested in utilizing the Patented technology or product is important once a Patent has been identified. Researching businesses in the same or similar industries or speaking with consultants or experts in the field might be part of this.
Sign a confidentiality agreement: You should protect your intellectual property rights before sharing any details about your Patent. Before starting talks, it can be useful to get the potential licensee to sign a confidentiality agreement. Since not all negotiations will proceed to execution, the secrecy agreement might be essential.
Connect with a new licensee about the license's terms: The license's parameters should be discussed, including its duration, whether it is exclusive or non-exclusive, its scope, any required royalties or other fees, and any other requirements. Term sheets are frequently used to document this, whether they are binding or not.
Draft a licence agreement: You need to prepare a licence agreement setting out the terms of the licence that have been agreed upon. The license agreement should provide for a detailed description of the Patent, licensee and terms and conditions.
Examine and sign the agreement: To make sure the licensing agreement represents the terms agreed upon and is legally binding, all parties should carefully analyze it. Upon mutual satisfaction, you can sign the agreement to complete the deal.

Limitations and Hazards of Patent Licensing

Less profit: Granting a Patent may provide lower profits than Patent licensing, as you can generate substantial money by putting your idea on the market. Profits will exceed your expectations even if capital investment carries some risk.
Depending on the licensee's abilities: As you are relying on the licensee's resources, expertise, and marketing efforts to get your product onto the market when you license your Patent, you can never be too sure of them. Because of this, selecting the ideal licensee is crucial to marketing your invention.
A license agreement can come with challenges: For example, if the business operates smoothly and the agreement is vague concerning royalty sharing and additional processing, the inventor may suffer a loss. Therefore, all conditions and clauses should be carefully stated when creating an agreement, and they should be read once again to allow for any necessary modifications or deletions.
The licensor may become your rival: If you choose to license something, the licensee may eat into the licensor's sales, which could mean a loss for the licensor since he will receive a lower royalty and lower earnings.
The extra requirement from the licensee: After you award the license to the licensee, he may not ask for anything at first, but later on, he might ask for financial contributions or even more data, which could take time or even cost you money. Thus, it is crucial that the agreement outlines all of the activities in detail and that the licensee does not request anything from the licensor in the future. These clauses ought to be made very evident.

What distinguishes Patent Assignment from Patent Licensing?

Patent Assignment	Patent Licensing
The act of a Patent holder assigning a Patent involves permanently transferring the Patent's exclusive rights. A record of such a transfer exists in the official Patent file. When a Patent is assigned, the assignee must pay the assignor the agreed-upon sum upfront and may thereafter profit from the Patent innovation.	On the other hand, Patent licensing is the act of a Patent holder allowing a third party to temporarily benefit from the Patent's interest. The nature of this transfer of Patent rights is transitory. According to a license, the licensee must give the licensor the royalty for the whole time the license is in effect.

Why Choose Kanakkupillai?

Kanakkupillai is a leading legal consulting company in India. We have been providing high-quality services in both developed and growing markets. Secure your business identity with Kanakkupillai's services. Let our trusted professionals handle your registration while you focus on your business. Register virtually, anytime, anywhere with Kanakkupillai.

Frequently Asked Questions

What is licensing for Patents? +

A Patent license is an agreement under which, in return for any royalties or other payments from the Patent holder, one party uses, sells and produces another person's invention.

How does licensing for Patents operate? +

Permission to use Patented technology in products or services is granted by the Patent owner to the licensee.

Can a Patent License be Sublicensed? +

Indeed, the licensee may sublicense the rights sometimes. The potential for this is explained in the grant clause.

Can a pending Patent application be licensed? +

Yes, but not always. Consult a Patent lawyer on your specific situation.

How do I discover potential license holders? +

Potential licensees and manufacturers can be found in a variety of locations like Trade shows, Advertisements, Venture Capital Partners, Patent website, Brokers and Submission companies and through direct contact.

Explain Patent Assignment? +

This is an agreement wherein one business, referred as the assignor, transfers all or a part of its rights, title, and interest in a Patent to another business, known as the assignee.

Is it possible to license a product without a Patent? +

Yes, a Patent is not necessary to license your invention. Without a Patent, you can still license the concept.

What is a Hybrid License? +

Patent rights are not always the whole story. A Patent license and other rights are included in a hybrid license. This enables the licensee to make the most use of their intellectual property rights.